These ETF Charts Show The Next Significant Resistance Levels For The S&P 500 & Nasdaq (SPY, QQQ)
Stocks reversed sharply to close mostly higher yesterday, as they recovered from significant early session losses. Except for the Dow Jones Industrial Average, the major indices all closed higher. The small-cap Russell 2000 led the recovery as it posted a 0.7% gain. The S&P MidCap 400 and the Nasdaq tacked on 0.6% and 0.4% respectively. The S&P 500 added a modest 0.2%, while the DJIA closed fractionally lower on the day. The NYSE also closed fractionally lower.
For the first time in quite a few sessions, market internals were bullish across the board. Turnover on the Nasdaq rose by 4.3% and on the NYSE by 1.1%. Advancing volume outpaced declining volume by a ratio of 1.6 to 1 on the NYSE and 1.2 to 1 on the Nasdaq. For a second day in a row, market internals were mixed. Turnover on the Nasdaq fell 0.4% but increased on the NYSE by 8.8%. However, declining volume edged out advancing volume on the Nasdaq and the NYSE by ratios of 1.4 to 1 and 1.1 to 1 respectively. The 0.4% advance on the Nasdaq combined with yesterday’s higher volume resulted in an accumulation day for the high-tech index. Although neither the S&P 500 nor the NYSE closed higher on the day, the magnitude of the reversal combined with the slightly higher volume should likely be viewed as accumulation for both of these indices also.
Based on yesterday’s price action, it appears as if we will see a move higher in the broad market over the next several days. However, there is still an abundance of overhead supply stocks must contend with, such as key moving average resistance and horizontal price resistance levels. The charts of the SPDR S&P 500 ETF (NYSEARCA:SPY) and the ProShares Nasdaq ETF (NASDAQ:QQQ) below show the next significant resistance levels for both ETFs, and are self explanatory. We will likely be looking to establish new swing trade short positions (or inverse ETFs) as these indices approach these resistance levels (particuarly if the major indices probe above these levels and then form bearish reversal candles).
As yesterday clearly demonstrates, market sentiment can reverse quickly. We went from what was shaping up to be a bearish “distribution day” (higher volume decline), to an “accumulation day” (higher volume advance) by the close. However, we still do not yet have a buy signal in the market and remain bearish on the market. Nevertheless, this could change quickly if the market posts another significant “accumulation day” sometime next week. For the moment, we anticipate short selling opportunities to develop as the market bounces.